The SCA provides clarity on the power of the CIPC to investigate matters

In this case, the Commission accepted and began to investigate a complaint from Ralston Smith (Smith) who alleged that about four years prior to that a fraudulently signed director resignation letter and accompanying director resignation documentation were fraudulently submitted with the Commission on his behalf in relation to Lahleni Lakes Proprietary Limited (Lahleni). When Smith made the complaint to the Commission, a dispute concerning, among other things, whether Smith had resigned as director of Lahleni had already been launched in the North Gauteng High Court. As part of its investigation, the Commission issued summons to Lahleni’s current director Ramesh Singh (Singh) to appear before it.

In response, Singh initially launched an application to review the Commission’s decision to investigate the complaint based on section 219(1)(a) of the Companies Act 71 of 2008 (Act). This section provides that a complaint in terms of the Act may not be initiated by or made to the Commission more than three years after the act or omission that is the cause of the complaint. Singh contended that the Commission had no jurisdiction to investigate because Smith had lodged the complaint more than three years after the alleged fraudulent submissions were made removing him as a director and therefore the complaint had prescribed. The court a quo dismissed the application.

On appeal, when addressing the submission that the complaint was time barred, the SCA interpreted section 219(1)(a) of the Act and ruled that the Commission’s obligation to maintain an accurate register of companies is not frozen in time. The SCA stated that section 219(1)(a) of the Act employs the words “the act or omission” to impose an obligation not to misrepresent the accuracy of the records or to omit to ensure that they are corrected. If there is a complaint that a company’s records are inaccurate, it equates to a complaint that there has been an act or omission which in terms of section 219(1)(a) constitutes the cause of complaint. The failure to cure the inaccuracy or make the Commission aware constitutes a discrete act which is not frozen in time.

Singh raised a further ground of appeal based on section 219(2) of the Act which provides that a complaint may not be prosecuted in terms of the Act against any person that is, or who has been, a respondent in proceedings under another section of the Act relating to substantially the same conduct. Based on this, he argued that the Commission had no power to investigate because a civil action on the same conduct was pending in the High Court. He further submitted that he could be prejudiced in the civil suit should he be compelled to co-operate with the Commission’s investigation.

The SCA ruled that the issue before the High Court was contractual in nature and not based on the provisions of the Act, hence section 219(2) was not applicable. Addressing Singh’s alleged prejudice, the SCA stated that where the issue concerns a choice between pursuing a civil action and a refusal to comply with a lawful demand issued by the Commission, the way a party deals with the process in each forum is a matter of choice which holds consequences attached to his decision. The SCA further indicated that the court’s powers to stay proceedings due to prejudice being proven is discretionary based on the prejudice shown. The court ruled that Singh had not proven that any prejudice would ensue to him should the Commission proceed with its investigation. The court further indicated that it would be expected that if there was an order of priority on competing fora, the statutory regulator would enjoy preference over private litigation. 

The appeal was dismissed with costs.